Illinois will become the third state to implement guidelines for companies to check if insureds who die and have a claim filed for their insurance contracts had multiple policies in force.
The regulation (Title 50 of the Administrative Code, Part 919) was finalized during the week of July 8 and will become effective in July 2003.
Before being approved, the regulation was changed to require companies to check every date two years before and two years after an insureds birth date to see if there are additional policies in the insureds name.
Originally, the draft had required a three-year search before and after a birth date, but a cost benefit analysis convinced the department to reduce the timeframe, according to Illinois Insurance Director Nat Shapo. There will probably be a 5% loss of potential hits and a 33% savings in the burden of compliance, he adds.
New York currently has a circular letter and Massachusetts has a bulletin on the issue. New York issued Circular Letter # 15 on July 3, 2001, which requires insurers to conduct a search for other policies on an insureds life once a claim is filed. Massachusetts Bulletin 2001-07 requires an insurer to search for multiple policies with “due diligence.”
As the National Association of Insurance Commissioners small face amount survey subgroup works with its parent working group to develop a model regulation, a survey to find out what companies are currently doing is underway.
The American Council of Life Insurers has a survey out to its members, both large and small companies, to find out if they have computer systems in place to check for multiple policies and, if there is not a computer system in place, what method the company has for checking for multiple policies.
The survey will also be sent to members of the Life Insurers Council, Atlanta; the National Alliance of Life Companies, Rosemont, Ill., and the National Fraternal Conference of America, Naperville, Ill. It is anticipated that data will be available in August.
A separate survey is scheduled to be sent out to state insurance departments to see what systems they have to detect compliance with searching for multiple policies. Results are expected by the fall NAIC meeting in September.
Other efforts by state insurance regulators are also being made. The Texas insurance department is currently conducting a survey on race-based policies that includes a question on multiple policies. And, other state insurance departments such as Alabamas, have conducted their own surveys on the multiple policies issue.
Reproduced from National Underwriter Life & Health/Financial Services Edition, July 22, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.